KUTA, Indonesia (CNN) --U.S. President George W. Bush has praised Indonesia for its support in the global war on terror and vowed to win the fight against terrorism.

Wrapping up a brief four-hour stopover on the Indonesian holiday island of Bali, Bush also paid homage to the more than 200 people killed in last year's nightclub bombings on the island as well as the 12 victims of the August suicide blast at Jakarta's J.W. Marriott Hotel.

"Today we pay tribute to the victims, we remember the suffering of their families and we reaffirm our commitment to win the war on terror," Bush said at a press conference on Wednesday with Indonesian President Megawati Sukarnoputri.

Later Wednesday, Bush arrived in the Australian capital of Canberra -- the last leg of his whirlwind Asia trip.

The Australian visit -- which coincides with a trip Down Under by Chinese President Hu Jintao -- is being seen as a thank you to Prime Minister John Howard for his steadfast allegiance to the U.S. and his support of the war on terror.

Bush will address the national Parliament, visit the national war memorial and discuss trade and the terror war with Howard during his 21-hour stay.

Police are expecting around 5,000 demonstrators to attend rallies on Thursday with most voicing their anger over the Iraq war. (Full story)

Terror moves

Before the Bali attacks last October, Indonesia -- the world's most populous Muslim nation -- was criticized for ignoring the terrorism problem and militant Islamic extremism within its borders.

The Indonesian terrorist attacks have been blamed on the al Qaeda terror network's arm in Southeast Asia, Jemaah Islamiyah, which has an estimated 3,000 members.

In the wake of the nightclub blasts, Jakarta doubled its efforts to crackdown on terrorism and apprehended dozens of JI suspects which earned the praise of international leaders.

Four key militants involved in the Bali blasts have been arrested and sentenced -- three to death -- while more than 20 others have also been convicted.

Bush did not visit the site of the Bali nightclub bombings because of security concerns, but did praise Indonesia as a key ally in Southeast Asia.

"The success of Indonesia as a pluralistic and democratic state is essential to the peace and prosperity of this region," he said.

"Indonesia is a vital partner and Indonesia is a friend to America. We share a commitment to democracy and tolerance. We stand together against terrorism," Bush said.

Bush and Megawati stroll along the beach to the press conference.

While both leaders characterized their talks as productive and positive, Megawati admitted that the two leaders did not agree on every issue.

"Despite the fact that we do not always share common perspective ... we both continue to hold mutual understanding that it is to the interest of the two countries to maintain consultation and cooperation in the pursuit of global peace," Megawati told reporters.

Anti-U.S. sentiment

With anti-U.S. sentiment in Indonesia at an all-time high, Bush also pushed to ease a growing gulf in attitudes towards America among Indonesia's Muslim population.

He met with eminent Hindu, Islam and Christian leaders during the Bali stopover for frank talks described by Megawati as a "positive development".

"Both sides were in agreement about the importance of religious tolerance as one of the major pillars of democracy in Indonesia," she said at the press conference.

The U.S. president urged Indonesia not to allow terrorism to be born out of religion.

"Americans hold a deep respect for the Islamic faith," Bush said. "We know that Islam is fully compatible with liberty and tolerance and progress because we see the proof in your country."

"Terrorists who claim Islam as their inspiration defile one of the great faiths. Murder has no place in any religious tradition. It must find no home in Indonesia," he said.

Before arriving in Indonesia, Bush made his first official visit to Singapore, where he and Prime Minister Goh Chok Tong discussed economic ties and Southeast Asia's fight against terrorism.

Typically, the annual APEC meeting dedicates itself to economic concerns, but Bush used a series of bilateral meetings to lobby the leaders for money and troops in Iraq and their backing in efforts to convince North Korea to shut down its nuclear weapons program.

-- Senior White House Correspondent John King and CNN Correspondents Atika Shubert and Dana Bash contributed to this report.